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General Electric (GE) Sees Supply Chain Impact on Cash Flow

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General Electric (GE - Free Report) continues to grapple with supply-chain disruptions, including labor and material shortages and high logistics costs.

At the Morgan Stanley Laguna Conference, held on Sep 15, GE’s chief financial officer, Carolina Dybeck Happe, said that supply chain disruptions are delaying delivery of product to customers. This is impacting the company’s free cash flow. Happe expects GE’s free cash flow to be in line with the second-quarter reported figure of $162 million or slightly better.

Shortage of raw materials and labor is weighing on the Aerospace segment, while the HealthCare segment is seeing reduced output due to supply-chain constraints. Lack of availability of raw materials is also hurting the Renewables segment. To tackle the supply-chain woes, the company is focusing on pricing actions, controlling costs and improving cash.

In the second quarter of 2022, supply-chain constraints led to a decline in revenues from Commercial Engines (part of the Aerospace segment). The HealthCare segment also suffered from supply shortages in the second quarter.

Despite adversities, GE management expects strong growth for Aerospace and HealthCare in the second half of 2022. For the third quarter of 2022, management expects General Electric’s organic revenues to increase in mid-single digits.

General Electric is on track to spin-off its healthcare business into a new public company in early 2023. In this regard, GE announced a new board for the independent GE HealthCare company.

Subject to final approval from the GE board of directors and other customary conditions, the tax-free spin-off is expected to be completed in the first week of January 2023.

Zacks Rank & Key Picks

General Electric currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks within the Conglomerates sector are as follows:

Carlisle Companies (CSL - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for CSL’s 2022 earnings has been revised upward by 14.6% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks.

Carlisle has an estimated earnings growth rate of 114.4% for the current year. Shares of CSL have rallied 26.5% in the past three months.

Icahn Enterprises (IEP - Free Report) presently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for IEP’s 2022 earnings has been revised upward by more than 100% in the past 60 days.

Icahn Enterprises has an estimated earnings growth rate of 144.4% for the current year. Shares of IEP have gained 6.7% in the past three months.

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